Bank of China

Goldman prepares for ICBC share sale

PUBLISHED : Tuesday, 06 March, 2012, 12:00am
UPDATED : Tuesday, 06 March, 2012, 12:00am

Goldman Sachs is considering selling a big chunk of the Industrial and Commercial Bank of China (ICBC) shares it owns, to help the US bank raise more than US$1 billion.

According to people familiar with the matter, the investment bank has informally contacted several major institutions, including JP Morgan Asset Management and BlackRock, to seek their thoughts on the possible sale of ICBC shares. There was no term sheet or related official document provided, the sources said.

The feedback was not overly positive as some asset managers expected ICBC share prices to fall in the coming months, which would allow them to buy the stock at a lower cost, said the sources.

'I think the intention [of Goldman Sachs] to sell is clear and now the question is when to sell and at what price,' said one of the sources, adding there was a price gap between the seller and potential buyers.

'It's not going to happen tomorrow but they are certainly blowing the water these days,' said the person. In Hong Kong's business community, 'blowing water' in Cantonese often means to float an idea before any real action is taken.

Yesterday, ICBC's Hong Kong-listed shares, also known as H-shares, ended 2.67 per cent lower from the previous trading session at HK$5.47 each. ICBC's H-shares have gained nearly 19 per cent this year. Goldman Sachs declined to comment.

Arthur Kwong, head of Asia-Pacific equities at BNP Paribas, believed the share price gain of most mainland banking stocks had almost peaked around 20 per cent this year.

Goldman Sachs has raised more than US$5.2 billion via its three sell-downs since 2009. Its last sale of ICBC shares took place in November 2011 when Goldman Sachs sold 1.75 billion ICBC H-shares at about HK$4.88 per share, official data show.

Bosera Asset Management's fund manager Andy Ng said he expected another sale of Chinese banking stocks in 2012 to be initiated by Western shareholders in banks like ICBC as they may want to deleverage to bolster capital positions at home.

However, to some Asia-focused asset managers with a long-term view, this year could mean a good opportunity to buy the stocks, he said. 'The market outlook for China remains robust on a relative basis and the mainland banking sector serves as a good proxy for gaining exposure to the China growth story,' Ng said.

Goldman Sachs still owns about 8.78 billion H-shares, or 10.11 per cent, of Beijing-based ICBC, official data shows. Some industry watchers expect Goldman Sachs to launch a big sale of ICBC H-shares once or twice a year for the next few years to gradually cash out.

'It's not possible to suddenly sell all the ICBC H-shares that Goldman Sachs owns,' said one industry veteran. 'It can't find buyers for so many shares at one time, and it's also politically sensitive to do so, so it has to come back to the market again and again every year.'

Goldman Sachs is not alone. Other foreign banks have sold large numbers of mainland bank shares in recent years. Such sales have been under growing political pressure.

Some Chinese officials and scholars have complained that mainland banks are like ATMs for their foreign shareholders, who are sitting on big returns. Those foreign investors bought into big state banks cheaply before they went public years ago.